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NYSE Disclosure

Last summer, the Securities and Exchange Commission approved rules requiring broadcasters airing the opinion of securities analysts to also disclose any business interests that the analysts or their firms might have in the stocks being discussed. Now, the SEC is poised to approve a similar rule for the print media. Adam Lashinsky, a columnist for Fortune Magazine, believes the rule acts as a gag order, limiting freedom of press. He speaks with Bob.

Transcript

BROOKE GLADSTONE: We're back with On the Media. I'm Brooke Gladstone.

BOB GARFIELD: And I'm Bob Garfield. Beginning last summer, rules promulgated by the stock exchanges and approved by the Securities and Exchange Commission required broadcasters airing the opinion of securities analysts to disclose any business interests the analyst or his firm might have in the stocks being discussed. Now the SEC is poised to approve a similar New York Stock Exchange rule for the print media, and the print media are going predictably ballistic. If they do not print the disclosures, according to the stock exchange template, they will be denied access to sources they now routinely cover. Adam Lashinsky [sp?], a columnist for Fortune magazine, believes that the rule acts as a gag order limiting freedom of the press. Still, he says, the abuses committed not that long ago suggest that some action was called for.

ADAM LASHINSKY: Throughout the boom, you know, from the mid-'90s onward, analysts, fund managers, people involved with companies would go on television, particularly on CNBC, and they would be talking as if they were giving advice when in fact what they were doing is what's known as "talking their book" -- they were talking up their own investments or their own investment banking relationships.

BOB GARFIELD: (breaks in with question) But now the rule is being extended to print publications. In effect, the New York Stock Exchange and Nasdaq are demanding that papers who quote analysts print the very same potential conflict of interest material within their articles that the broadcasters are required to put in supers on their screens. In effect, they're dictating content to newspapers. And if the newspapers don't accept the terms -- what happens? They're frozen out?

ADAM LASHINSKY: Well, not only are they dictating what the newspapers must write and what the broadcasters must say, but they're telling their members -- the analysts who are New York Stock Exchange members -- that if that newspaper doesn't print your disclosure, you may not talk to them in the future. So think about the implications there. They're saying that you may not get information out to the public, at least not through the avenue of the reporter who refused to print your conflict.

BOB GARFIELD:Now there's all sorts of problems that can flow from that, obviously, not the least of which is it will result in a net reduction of the amount of information going to investors, but it's also a clear infringement on the freedom of the press, but it's not a government infringement; there's no constitutional amendment guaranteeing press access to private companies. So is there anything that the print press can do about this?

ADAM LASHINSKY: There is a constitutional problem, because it's telling the press what they must write, and there, there's no precedent for that --certainly not in the newspapers. This isn't political speech; this is commercial speech. So is there anything that the newspapers can do? Sure, they can certainly oppose this on constitutional grounds, and will.

BOB GARFIELD:As I understand it, this rule has to be signed off on by the Securities and Exchange Commission. If that's the case, then there is a governmental aspect to this, and a government agency would be in fact endorsing an arrangement that infringes on free speech. I gather that the best First Amendment case resides there.

ADAM LASHINSKY: Oh, absolutely. And just think about what's being done here. The SEC-'s job is to protect investors and regulate the securities industry. They're not supposed to have any purview over the media; certainly not over newspapers. And that's where they're going to have to be reined back, and I suspect they will be. The whole thing doesn't smell right, and I think they'll agree with that.

BOB GARFIELD:So what would your suggestion be? On the one hand it's in the interest of investors to get information that they can trust or at least to have all of the potential conflicts on the table. On the other hand, newspapers are not accustomed to being told what to do, much less being extorted to run information which appears to be the case here. Is there a solution that doesn't involve such an extraordinary degree of coercion?

ADAM LASHINSKY: Well, in fact Bob we have a solution; what's needed is a code of conduct on the part of the media and in a truly capitalist way we effectively have one now which is that we the media have been embarrassed by our behavior over the past, let's say, five years and so we've developed if not a formal code of conduct, an informal code of conduct. Realize: newspapers are doing what they're being asked to. If an analyst tells a, a business reporter I own this stock or my investment bank led their IPO two years ago, it's highly likely that the writer will write that in his or her article, so what's at issue here, as you put it, is our desire to not be coerced. The New York Stock Exchange has every reason to be in the business of telling its members how to do their jobs but not the other way around.

BOB GARFIELD: Well, Adam Lashinsky, thank you very much!

ADAM LASHINSKY: Thanks so much for having me on the show, Bob.

BOB GARFIELD: Adam Lashinsky is a senior writer for Fortune magazine, based in Palo Alto, California.

About On The Media

WNYC’s weekly investigation into how the media shapes our world view. Veteran journalists Brooke Gladstone and Bob Garfield give you the tools to survive the media maelstrom.

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